subchapter v. oil and gas conservation. law shall be designated and known as the oil and gas...
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NC General Statutes - Chapter 113 Article 27 1
SUBCHAPTER V. OIL AND GAS CONSERVATION.
Article 27.
Oil and Gas Conservation.
Part 1. General Provisions.
§ 113-378. Persons drilling for oil or gas to register and furnish bond.
Any person, firm or corporation before making any drilling exploration in this State for oil or
natural gas shall register with the Department of Environmental Quality. To provide for such
registration, the drilling operator must furnish the name and address of such person, firm or
corporation, and the location of the proposed drilling operations, and file with the Department a
bond running to the State of North Carolina in an amount totaling the sum of (i) five thousand
dollars ($5,000) plus (ii) one dollar ($1.00) per linear foot proposed to be drilled for the well.
Any well opened by the drilling operator shall be plugged upon abandonment in accordance with
the rules of the Department. (1945, c. 765, s. 2; 1971, c. 813, s. 1; 1973, c. 1262, s. 86; 1977, c.
771, s. 4; 1987, c. 827, s. 110; 1989, c. 727, s. 118; 1997-443, s. 11A.119(a); 2011-276, s. 1;
2013-365, s. 5(a); 2015-241, s. 14.30(u).)
§ 113-379. Filing log of drilling and development of each well.
Upon the completion or shutting down of any abandoned well, the drilling operator shall file
with the Department or other State agency, or with any division thereof hereinafter created for
the regulation of drilling for oil or natural gas, a complete log of the drilling and development of
each well. (1945, c. 765, s. 3; 1973, c. 1262, s. 86; 1977, c. 771, s. 4; 1989, c. 727, s. 119.)
§ 113-380. Violation a misdemeanor.
Except as otherwise provided, any person, firm or officer of a corporation violating any of
the provisions of this Article shall upon conviction thereof be guilty of a Class 1 misdemeanor.
(1945, c. 765, s. 4; 1971, c. 813, s. 2; 1993, c. 539, s. 870; 1994, Ex. Sess., c. 24, s. 14(c);
2012-143, s. 2(a).)
Part 2. The Oil and Gas Conservation Act.
§ 113-381. Title.
This law shall be designated and known as the Oil and Gas Conservation Act. (1945, c. 702,
s. 1.)
§ 113-382. Declaration of policy.
In recognition of imminent evils that can occur in the production and use and waste of natural
oil and/or gas in the absence of equal or correlative rights of owners of crude oil or natural gas in
a common source of supply to produce and use the same, and in the absence of adequate
measures for the protection of the environment, this law is enacted for the protection of public
interests against such evils by prohibiting waste and compelling ratable production and
authorizing regulations for the protection of the environment. (1945, c. 702, s. 2; 1971, c. 813,
ss. 3, 4.)
§§ 113-383 through 113-386. Repealed by Session Laws 1973, c. 1262, s. 86.
NC General Statutes - Chapter 113 Article 27 2
§ 113-387: Repealed by Session Laws 2014-4, s. 17(c), effective July 1, 2015, and applicable to
energy minerals severed on or after that date.
§ 113-388: Repealed by Session Laws 2014-4, s. 17(c), effective July 1, 2015, and applicable to
energy minerals severed on or after that date.
§ 113-389. Definitions.
Unless the context otherwise requires, the words defined in this section shall have the
following meaning when found in this law:
(1) "Base fluid" shall mean the continuous phase fluid type, such as water, used in
a hydraulic fracturing treatment.
(1a) "Commission" shall mean the North Carolina Oil and Gas Commission.
(1b) "Department" shall mean the Department of Environmental Quality.
(1c) "Division" shall mean the Division of Energy, Mineral, and Land Resources
of the Department of Environmental Quality.
(2) "Field" shall mean the general area which is underlaid or appears to be
underlaid by at least one pool; and "field" shall include the underground
reservoir or reservoirs containing crude petroleum oil or natural gas, or both.
The words "field" and "pool" mean the same thing when only one
underground reservoir is involved; "field," unlike "pool," may relate to two or
more pools.
(3) "Gas" shall mean all natural gas, including casing-head gas, and all other
hydrocarbons not defined as oil in subdivision (7).
(3a) "Hydraulic fracturing additive" shall mean any chemical substance or
combination of substances, including any chemical or proppants, which is
intentionally added to a base fluid for purposes of preparing a hydraulic
fracturing fluid or treatment of a well.
(3b) "Hydraulic fracturing fluid" shall mean the fluid, including the applicable base
fluid and all hydraulic fracturing additives, used to perform a hydraulic
fracturing treatment.
(3c) "Hydraulic fracturing treatment" shall mean all stages of the treatment of a
well by the application of hydraulic fracturing fluid under pressure that is
expressly designed to initiate or propagate fractures in a target geologic
formation to enhance production of oil and gas.
(4) "Illegal gas" shall mean gas which has been produced within the State of
North Carolina from any well during any time that well has produced in
excess of the amount allowed by any rule, regulation or order of the
Department, as distinguished from gas produced within the State of North
Carolina from a well not producing in excess of the amount so allowed, which
is "legal gas."
(5) "Illegal oil" shall mean oil which has been produced within the State of North
Carolina from any well during any time that that well has produced in excess
of the amount allowed by rule, regulation or order of the Department, as
distinguished from oil produced within the State of North Carolina from a
well not producing in excess of the amount so allowed, which is "legal oil."
NC General Statutes - Chapter 113 Article 27 3
(6) "Illegal product" shall mean any product of oil or gas, any part of which was
processed or derived, in whole or in part, from illegal oil or illegal gas or from
any product thereof, as distinguished from "legal product," which is a product
processed or derived to no extent from illegal oil or illegal gas.
(6a) "Lessee" shall mean the person entitled under an oil and gas lease to drill and
operate wells.
(6b) "Lessor" shall mean the owner of subsurface oil or gas resources who has
executed a lease and who is entitled to the payment of a royalty on production.
(7) "Oil" shall mean crude petroleum oil, and other hydrocarbons, regardless of
gravity, which are produced at the well in liquid form by ordinary production
methods, and which are not the result of condensation of gas after it leaves the
reservoir.
(7a) "Oil and gas developer or operator" or "developer or operator" shall mean a
person who acquires a lease for the purpose of conducting exploration for or
extracting oil or gas.
(7b) "Oil and gas operations" or "activities" shall mean the exploration for or
drilling of an oil and gas well that requires entry upon surface estate and the
production operations directly related to the exploration or drilling.
(8) "Owner" shall mean the person who has the right to drill into and to produce
from any pool, and to appropriate the production either for himself or for
himself and others.
(9) "Person" shall mean any natural person, corporation, association, partnership,
receiver, trustee, guardian, executor, administrator, fiduciary or representative
of any kind.
(10) "Pool" shall mean an underground reservoir containing a common
accumulation of crude petroleum oil or natural gas or both. Each zone of a
general structure which is completely separated from the other zone in the
structure is covered by the term "pool" as used herein.
(11) "Producer" shall mean the owner of a well or wells capable of producing oil or
gas, or both.
(12) "Product" means any commodity made from oil or gas and shall include
refined crude oil, crude tops, topped crude, processed crude petroleum,
residue from crude petroleum, cracking stock, uncracked fuel oil, fuel oil,
treated crude oil, residuum, gas oil, casing-head gasoline, natural gas gasoline,
naphtha, distillate, gasoline, kerosene, benzine, wash oil, waste oil, blended
gasoline, lubricating oil, blends or mixtures of oil with one or more liquid
products or by-products derived from oil or gas, and blends or mixtures of two
or more liquid products or by-products derived from oil or gas, whether
hereinabove enumerated or not.
(12a) "Proppant" shall mean sand or any natural or man-made material that is used
in a hydraulic fracturing treatment to prop open the artificially created or
enhanced fractures once the treatment is completed.
(12b) "Surface owner" means the person who holds record title to or has a
purchaser's interest in the surface of real property.
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(13) "Tender" shall mean a permit or certificate of clearance for the transportation
of oil, gas or products, approved and issued or registered under the authority
of the Department.
(14) "Waste" in addition to its ordinary meaning, shall mean "physical waste" as
that term is generally understood in the oil and gas industry. It shall include:
a. The inefficient, excessive or improper use or dissipation of reservoir
energy; and the locating, spacing, drilling, equipping, operating or
producing of any oil or gas well or wells in a manner which results, or
tends to result, in reducing inefficiently the quantity of oil or gas
ultimately to be recovered from any pool in this State.
b. The inefficient storing of oil, and the locating, spacing, drilling,
equipping, operating or producing of any oil or gas well or wells in a
manner causing, or tending to cause, unnecessary or excessive surface
loss or destruction of oil or gas.
c. Abuse of the correlative rights and opportunities of each owner of oil
and gas in a common reservoir due to nonuniform, disproportionate,
and unratable withdrawals causing undue drainage between tracts of
land.
d. Producing oil or gas in such manner as to cause unnecessary water
channelling or coning.
e. The operation of any oil well or wells with an inefficient gas-oil ratio.
f. The drowning with water of any stratum or part thereof capable of
producing oil or gas.
g. Underground waste however caused and whether or not defined.
h. The creation of unnecessary fire hazards.
i. The escape into the open air, from a well producing both oil and gas,
of gas in excess of the amount which is necessary in the efficient
drilling or operation of the well.
j. Permitting gas produced from a gas well to escape into the air.
(15) "Water supply" shall mean any groundwater or surface water intended or used
for human consumption; household purposes; or farm, livestock, or garden
purposes. (1945, c. 702, s. 9; 1973, c. 1262, s. 86; 1977, c. 771, s. 4; 1989, c.
727, s. 218(59); 1997-443, s. 11A.119(a); 2011-276, s. 3(a); 2012-143, s. 2(b);
2014-4, s. 4(c); 2015-241, s. 14.30(u).)
§ 113-390. Waste prohibited.
Waste of oil or gas as defined in this law is hereby prohibited. (1945, c. 702, s. 10.)
§ 113-391. Jurisdiction and authority; rules and orders.
(a) The Oil and Gas Commission, created by G.S. 143B-293.1, in conjunction with
rule-making authority specifically reserved to the Environmental Management Commission
under subsection (a3) of this section, shall establish a modern regulatory program for the
management of oil and gas exploration and development in the State and the use of horizontal
drilling and hydraulic fracturing treatments for that purpose. The program shall be designed to
protect public health and safety; protect public and private property; protect and conserve the
State's air, water, and other natural resources; promote economic development and expand
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employment opportunities; and provide for the productive and efficient development of the
State's oil and gas resources. To establish the program, the Commission shall adopt rules for all
of the following purposes:
(1) Regulation of pre-drilling exploration activities, including seismic and other
geophysical and stratigraphic surveys and testing.
(2) Regulation of drilling, operation, casing, plugging, completion, and
abandonment of wells.
(3) Prevention of pollution of water supplies by oil, gas, or other fluids used in oil
and gas exploration and development.
(4) Protection of the quality of the water, air, soil, or any other environmental
resource against injury or damage or impairment.
(5) Regulation of horizontal drilling and hydraulic fracturing treatments for the
purpose of oil and gas exploration. Such rules shall, at a minimum, include
standards or requirements related to the following:
a. Information and data to be submitted in association with applications
for permits to conduct oil and gas exploration and development
activities using horizontal drilling and hydraulic fracturing treatments,
which may include submission of hydrogeological investigations and
identification of mechanisms to prevent and diagnose sources of
groundwater contamination in the area of drilling sites. In formulating
these requirements, the Commission shall consider (i) how North
Carolina's geology differs from other states where oil and gas
exploration and development activities using horizontal drilling and
hydraulic fracturing treatments are common and (ii) the routes of
possible groundwater contamination resulting from these activities and
the potential role of vertical geological structures such as dikes and
faults as conduits for groundwater contamination.
b. Collection of baseline data, including groundwater, surface water, and
air quality in areas where oil and gas exploration and development
activities are proposed. With regard to rules applicable to baseline data
for groundwater and surface water, the Commission shall adopt rules
that, at a minimum, establish standards to satisfy the pre-drilling
testing requirement established under G.S. 113-421(a), including
contaminants for which an operator or developer must test and
necessary qualifications for persons conducting such tests.
c. Appropriate construction standards for oil and gas wells, which shall
address the additional pressures of horizontal drilling and hydraulic
fracturing treatments. These rules, at a minimum, shall include
standards for casing and cementing sufficient to handle highly
pressurized injection of hydraulic fracturing fluids into a well for
purposes of fracturing bedrock and extraction of gas, and construction
standards for other gas production infrastructure, such as storage pits
and tanks.
d. Appropriate siting standards for wells and other gas production
infrastructure, such as storage pits and tanks, including appropriate
setback requirements and identification of areas, such as floodplains,
NC General Statutes - Chapter 113 Article 27 6
where oil and gas exploration and production activities should be
prohibited. Siting standards adopted shall be consistent with any
applicable water quality standards adopted by the Environmental
Management Commission or by local governments pursuant to water
quality statutes, including standards for development in water supply
watersheds.
e. Limits on water use, including, but not limited to, a requirement that
oil and gas operators prepare and have a water and wastewater
management plan approved by the Department, which, among other
things, limits water withdrawals during times of drought and periods
of low flows. Rules adopted shall be (i) developed in light of water
supply in the areas of proposed activity, competing water uses in those
areas, and expected environmental impacts from such water
withdrawals and (ii) consistent with statutes, and rules adopted by the
Environmental Management Commission pursuant to those statutes,
which govern water quality and management of water resources,
including, but not limited to, statutes and rules applicable to water
withdrawal registration, interbasin transfer requirements, and water
quality standards related to wastewater discharges.
f. Management of wastes produced in connection with oil and gas
exploration and development and use of horizontal drilling and
hydraulic fracturing treatments for that purpose. Such rules shall
address storage, transportation, and disposal of wastes that may
contain radioactive materials or wastes that may be toxic or have other
hazardous wastes' characteristics that are not otherwise regulated as a
hazardous waste by the federal Resource Conservation and Recovery
Act (RCRA), such as top-hole water, brines, drilling fluids, additives,
drilling muds, stimulation fluids, well servicing fluids, oil, production
fluids, and drill cuttings from the drilling, alteration, production,
plugging, or other activity associated with oil and gas wells. Wastes
generated in connection with oil and gas exploration and development
and use of horizontal drilling and hydraulic fracturing treatments for
that purpose that constitute hazardous waste under RCRA shall be
subject to rules adopted by the Environmental Management
Commission to implement RCRA requirements in the State.
g. Prohibitions on use of certain chemicals and constituents in hydraulic
fracturing fluids, particularly diesel fuel.
h. Disclosure of chemicals and constituents used in oil and gas
exploration, drilling, and production, including hydraulic fracturing
fluids, to State regulatory agencies and to local government emergency
response officials, and, with the exception of those items constituting
trade secrets, as defined in G.S. 66-152(3), and that are designated as
confidential or as a trade secret under G.S. 132-1.2, requirements for
disclosure of those chemicals and constituents to the public.
i. Installation of appropriate safety devices and development of protocols
for response to well blowouts, chemical spills, and other emergencies,
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including requirements for approved emergency response plans and
certified personnel to implement these plans as needed.
j. Measures to mitigate impacts on infrastructure, including damage to
roads by truck traffic and heavy equipment, in areas where oil and gas
exploration and development activities that use horizontal drilling and
hydraulic fracturing technologies are proposed to occur.
k. Notice, record keeping, and reporting.
l. Proper well closure, site reclamation, post-closure monitoring, and
financial assurance. Rules for financial assurance shall require that an
oil or gas developer or operator establish financial assurance that will
ensure that sufficient funds are available for well closure, post-closure
maintenance and monitoring, any corrective action that the
Department may require, and to satisfy any potential liability for
sudden and nonsudden accidental occurrences, and subsequent costs
incurred by the Department in response to an incident involving a
drilling operation, even if the developer or operator becomes insolvent
or ceases to reside, be incorporated, do business, or maintain assets in
the State.
(6) Repealed by Session Laws 2014-4, s. 9, effective June 4, 2014.
(7) To require the making of reports showing the location of oil and gas wells and
the filing of logs and drilling records.
(8) To prevent "blowouts," "caving," and "seepage," as such terms are generally
understood in the oil and gas industry.
(9) To identify the ownership of all oil or gas wells, producing leases, refineries,
tanks, plants, structures, and all storage and transportation equipment and
facilities.
(10) To regulate the "shooting," perforating, and chemical treatment of wells.
(11) To regulate secondary recovery methods, including the introduction of gas,
air, water, or other substances into producing formations.
(12) To regulate the spacing of wells and to establish drilling units.
(13) To regulate and, if necessary in its judgment for the protection of unique
environmental values, to prohibit the location of wells in the interest of
protecting the quality of the water, air, soil, or any other environmental
resource against injury, damage, or impairment.
(13a) Criteria to set the amount of a bond required pursuant to G.S. 113-421(a3),
including, at a minimum, the number of wells proposed at a site, the
pre-drilling condition of the property, the amount of acreage that would be
impacted by the proposed oil and gas activities, and other factors designed to
enable establishment of bonds on a site-by-site basis.
(14) Any other matter the Commission deems necessary for implementation of a
modern regulatory program for the management of oil and gas exploration and
development in the State and the use of horizontal drilling and hydraulic
fracturing for that purpose.
(a1) The regulatory program required to be established and the rules required to be
adopted pursuant to subsection (a) of this section shall not include a program or rules for the
NC General Statutes - Chapter 113 Article 27 8
regulation of oil and gas exploration and development in the waters of the Atlantic Ocean and the
coastal sounds as defined in G.S. 113A-103.
(a2) In addition to the matters for which the Commission is required to adopt rules
pursuant to subsection (a) of this section, the Commission may adopt rules as it deems necessary
for any of the following purposes:
(1) To require the operation of wells with efficient gas-oil ratios and to fix such
ratios.
(2) To limit and prorate the production of oil or gas, or both, from any pool or
field for the prevention of waste as defined in this Article and rules adopted
thereunder.
(3) To require, either generally or in or from particular areas, certificates of
clearance or tenders in connection with the transportation of oil or gas.
(4) To prevent, so far as is practicable, reasonably avoidable drainage from each
developed unit which is not equalized by counter-drainage.
(a3) The Environmental Management Commission shall adopt rules, after consideration of
recommendations from the Oil and Gas Commission, for all of the following purposes:
(1) Stormwater control for sites on which oil and gas exploration and
development activities are conducted.
(2) Regulation of toxic air emissions from drilling operations, if it determines that
the State's current air toxics program and any federal regulations governing
toxic air emissions from drilling operations to be adopted by the State by
reference are inadequate to protect public health, safety, welfare, and the
environment. In formulating appropriate standards, the Department shall
assess emissions from oil and gas exploration and development activities that
use horizontal drilling and hydraulic fracturing technologies, including
emissions from associated truck traffic, in order to (i) determine the adequacy
of the State's current air toxics program to protect landowners who lease their
property to drilling operations and (ii) determine the impact on ozone levels in
the area in order to determine measures needed to maintain compliance with
federal ozone standards.
(a4) The Department shall administer and enforce the provisions of this Article, and rules
adopted thereunder, and all other laws relating to the conservation of oil and gas, except for
jurisdiction and authority reserved to the Department of Labor and the Oil and Gas Commission,
as otherwise provided. The Commission and the Department may issue orders as may be
necessary from time to time in the proper administration and enforcement of this Article and
rules adopted thereunder.
(a5) Entry of rules in the North Carolina Administrative Code that address the areas
identified by subsections (a) and (a3) of this section by July 1, 2015, create a rebuttable
presumption that the rules are sufficient to meet the requirements for development of a modern
regulatory program pursuant to this section.
(a6) The Commission shall have the authority to develop rules addressing requirements
for: permit applications; permit modifications; permit conditions; denial of applications for
permits; permit transfers from one person to another; and permit durations, suspensions,
revocations, and release.
(b) The Commission and the Department, as appropriate, shall have the authority and it
shall be their duty to make such inquiries as may be proper to implement the provisions of this
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Article. In the exercise of such power the Commission and the Department, as appropriate, shall
have the authority to collect data; to make investigations and inspections; to examine properties,
leases, papers, books and records; to examine, check, test and gauge oil and gas wells, tanks,
refineries, and means of transportation; to hold hearings; and to provide for the keeping of
records and the making of reports; and to take such action as may be reasonably necessary to
enforce this law.
(b1) In the exercise of their respective authority over oil and gas exploration and
development activities, the Commission and the Department, as applicable, shall have access to
all data, records, and information related to such activities, including, but not limited to, seismic
surveys, stratigraphic testing, geologic cores, proposed well bore trajectories, hydraulic
fracturing fluid chemicals and constituents, drilling mud chemistry, and geophysical borehole
logs. With the exception of information designated as a trade secret, as defined in
G.S. 66-152(3), and that is designated as confidential or as a trade secret under G.S. 132-1.2, the
Department shall make any information it receives available to the public. The State Geologist,
or the State Geologist's designee, shall serve as the custodian of all data, information, and
records received by the Department pursuant to this subsection, including information designated
as a trade secret, as defined in G.S. 66-152(3), and that is designated as confidential or as a trade
secret under G.S. 132-1.2, and shall ensure that all of the information, including information
designated as a trade secret, as defined in G.S. 66-152(3), and that is designated as confidential
or as a trade secret under G.S. 132-1.2, is maintained securely as provided in G.S. 132-7.
(c) Repealed by Session Laws 2012-143, s. 2(c), effective August 1, 2012.
(d) The Department of Labor shall develop, adopt, and enforce rules establishing health
and safety standards for workers engaged in oil and gas operations in the State, including
operations in which hydraulic fracturing treatments are used for that purpose.
(e) The Department shall submit an annual report on its activities conducted pursuant to
this Article and rules adopted under it to the Environmental Review Commission, the Joint
Legislative Commission on Energy Policy, the Joint Legislative Oversight Committee on
Agriculture and Natural and Economic Resources, the chairs of the Senate Appropriations
Committee on Agriculture, Natural, and Economic Resources, the chairs of the House of
Representatives Appropriations Committee on Agriculture and Natural and Economic Resources,
and the Fiscal Research Division of the General Assembly on or before October 1 of each year.
(1945, c. 702, s. 11; 1971, c. 813, ss. 5, 6; 1973, c. 1262, s. 86; 1987, c. 827, s. 111; 1989, c. 727,
s. 120; 2012-143, s. 2(c); 2013-365, s. 5(b); 2014-4, ss. 4(c), 7(a), 8(b), 9; 2014-122, s. 11(j);
2015-1, s. 6(a); 2017-57, s. 14.1(qq).)
§ 113-391.1. Trade secret and confidential information determination; protection;
retention; disclosure to emergency personnel.
(a) Legislative Findings. – The General Assembly finds that while confidential
information must be maintained as such with the utmost care, for the protection of public health,
safety, and the environment, the information should be immediately accessible to first responders
and medical personnel in the event that the information is deemed necessary to address an
emergency.
(b) Determination and Treatment of Confidential Information. – Information obtained by
the Commission and the Department pursuant to this Article, and rules adopted thereunder, shall
be available to the public except that, upon a showing satisfactory to the Commission by any
person that information to which the Commission and Department has access, if made public,
NC General Statutes - Chapter 113 Article 27 10
would divulge methods or processes entitled to protection as confidential information pursuant to
G.S. 132-1.2, the Commission shall consider the information confidential. In accordance with
subsection (b1) of G.S. 113-391, the State Geologist shall serve as the custodian of the
confidential information and shall ensure that it is maintained securely as provided in G.S. 132-7.
The State Geologist, or the Geologist's designee, shall:
(1) Review confidential information that concerns hydraulic fracturing fluid, as
that term is defined in G.S. 113-389, to ensure compliance with all State and
federal laws, rules, and regulations concerning prohibited chemicals or
constituents, or exceedances of standards for chemicals or constituents. The
State Geologist, or the Geologist's designee, shall issue a written certification
within five days of completion of the review that the hydraulic fracturing
fluids, including chemicals and constituents contained therein, comply with all
State and federal laws, rules, and regulations; (ii) transmit the certification to
the Mining and Energy Commission and the Director of the Division of
Energy, Mining, and Land Resources; and (iii) transmit a copy of the
certification electronically to the permittee. Horizontal drilling and hydraulic
fracturing treatments shall not commence until this written certification has
been issued and transmitted as required by this subsection.
(2) Review, in consultation with the State Health Director, confidential
information that concerns hydraulic fracturing fluid, as that term is defined in
G.S. 113-389, to advise local health departments of additional parameters that
should be included in testing for private drinking water wells in their
jurisdictions in compliance with the requirements of G.S. 87-97 and the
Private Well Water Education Act enacted by S.L. 2013-122.
(c) Exceptions to Disclosure Prohibitions. – Confidential information obtained by the
Commission and the Department pursuant to this Article, and rules adopted thereunder, may be
disclosed to any officer, employee, or authorized representative of any federal or State agency if
disclosure is necessary to carry out a proper function of the Department or other agency or when
relevant in any proceeding under this Article. Confidential information shall be disclosed to the
following:
(1) The Division of Emergency Management of the Department of Public Safety.
The Division shall maintain this information as confidential except if
disclosure is necessary to carry out a proper function of the Division,
including for the purposes of emergency planning and emergency response.
For purposes of this section, the term "emergency" is defined as provided in
G.S. 166A-19.3.
(2) A treating health care provider who determines that a medical emergency
exists and that the information is necessary for emergency or first aid
treatment. Regardless of the existence of a written statement of need or a
confidentiality agreement, the Department shall immediately disclose the
confidential information to the treating health care provider upon request. If
confidential information is disclosed pursuant to this subdivision, the
Department shall notify the owner of the confidential information as soon as
practicable, but no later than 24 hours after disclosure. The owner of the
confidential information may require execution of a written statement of need
and a confidentiality agreement from the treating health care provider as soon
NC General Statutes - Chapter 113 Article 27 11
as circumstances permit. The confidentiality agreement (i) may restrict the use
of the information to the health purposes indicated in a written statement of
need; (ii) may provide for appropriate legal remedies in the event of a breach
of the agreement, including stipulation of a reasonable pre-estimate of likely
damages; and (iii) may not include requirements for the posting of a penalty
bond. The parties are not precluded from pursuing noncontractual remedies to
the extent permitted by law.
(3) A Fire Chief, as that term is defined in G.S. 95-174, who determines that an
emergency exists and that the information is necessary to address the
emergency. Regardless of the existence of a written statement of need or a
confidentiality agreement, the Department shall immediately disclose the
confidential information to the Fire Chief upon request. If confidential
information is disclosed pursuant to this subdivision, the Department shall
notify the owner of the confidential information as soon as practicable, but no
later than 24 hours after disclosure. The owner of the confidential information
may require execution of a written statement of need and a confidentiality
agreement from the Fire Chief as soon as circumstances permit. The
confidentiality agreement (i) may restrict the use of the information to the
emergency purposes indicated in a written statement of need; (ii) may provide
for appropriate legal remedies in the event of a breach of the agreement,
including stipulation of a reasonable pre-estimate of likely damages; and (iii)
may not include requirements for the posting of a penalty bond. The parties
are not precluded from pursuing noncontractual remedies to the extent
permitted by law.
(d) Penalties for Unlawful Disclosure. – Except as provided in subsection (c) of this
section or as otherwise provided by law, any person who has access to confidential information
pursuant to this section and who knowingly and willfully discloses it to any person not
authorized to receive it shall be guilty of a Class 1 misdemeanor and shall be subject to civil
action for damages and injunction by the owner of the confidential information, including,
without limitation, actions under Article 24 of Chapter 66 of the General Statutes.
(e) Appeal From Commission Decisions Concerning Confidentiality. – Within 10 days of
any decision made pursuant to subsection (b) of this section, the Commission shall provide
notice to any person who submits information asserted to be confidential (i) that the information
is not entitled to confidential treatment and (ii) of any decision to release such information to any
person who has requested the information. Notwithstanding the provisions of G.S. 132-9, or
procedures for appeal provided under Article 4 of Chapter 150B of the General Statutes, any
person who requests information and any person who submits information who is dissatisfied
with a decision of the Commission to withhold or release information made pursuant to
subsection (b) of this section shall have 30 days after receipt of notification from the
Commission to appeal by filing an action in superior court and in accordance with the procedures
for a mandatory complex business case set forth in G.S. 7A-45.4. Notwithstanding any other
provision of G.S. 7A-45.4, the appeal shall be heard de novo by a judge designated as a Business
Court Judge under G.S. 7A-45.3. The information may not be released by the Commission until
the earlier of (i) the 30-day period for filing of an appeal has expired without filing of an appeal
or (ii) a final judicial determination has been made in an action brought to appeal a decision of
NC General Statutes - Chapter 113 Article 27 12
the Commission. In addition, the following shall apply to actions brought pursuant to this
section:
(1) Such actions shall be set down for immediate hearing.
(2) The burden shall be on the owner of the information to show that the
information is entitled to protection as confidential information pursuant to
G.S. 132-1.2.
(3) The court shall allow a party seeking disclosure of information who
substantially prevails to recover its reasonable attorneys' fees if attributed to
the information. The court may not assess attorneys' fees against the
Commission or the Department, however, but shall impose such fees on the
owner of the information asserting confidentiality.
(4) If the court determines that an action brought pursuant to this section was filed
in bad faith or was frivolous, the court shall assess reasonable attorneys' fees
against the person or persons instituting the action and award to the prevailing
party or parties. (2014-4, s. 8(a); 2014-115, s. 67.)
§ 113-392. Protecting pool owners; drilling units in pools; location of wells; shares in pools.
(a) Whether or not the total production from a pool be limited or prorated, no rule or
order of the Commission shall be such in terms or effect:
(1) That it shall be necessary at any time for the producer from, or the owner of, a
tract of land in the pool, in order that he may obtain such tract's just and
equitable share of the production of such pool, as such share is set forth in this
section, to drill and operate any well or wells on such tract in addition to such
well or wells as can produce without waste such share, or
(2) As to occasion net drainage from a tract unless there be drilled and operated
upon such tract a well or wells in addition to such well or wells thereon as can
produce without waste such tract's just and equitable share, as set forth in this
section, of the production of such pool.
(b) For the prevention of waste and to avoid the augmenting and accumulation of risks
arising from the drilling of an excessive number of wells, the Commission shall, after a hearing,
establish a drilling unit or units for each pool. The Commission may establish drainage units of
uniform size for the entire pool or may, if the facts so justify, divide into zones any pool,
establish a drainage unit for each zone, which unit may differ in size from that established in any
other zone; and the Commission may from time to time, if the facts so justify, change the size of
the unit established for the entire pool or for any zone or zones, or part thereof, establishing new
zones and units if the facts justify their establishment.
(c) Repealed by Session Laws 2014-4, s. 10, effective June 4, 2014.
(d) Subject to the reasonable requirements for prevention of waste, a producer's just and
equitable share of the oil and gas in the pool (also sometimes referred to as a tract's just and
equitable share) is that part of the authorized production for the pool (whether it be the total
which could be produced without any restriction on the amount of production, or whether it be
an amount less than that which the pool could produce if no restriction on the amount were
imposed) which is substantially in the proportion that the quantity of recoverable oil and gas in
the developed area of his tract in the pool bears to the recoverable oil and gas in the total
developed area of the pool, insofar as these amounts can be ascertained practically; and to that
end, the rules, permits and orders of the Commission shall be such as will prevent or minimize
NC General Statutes - Chapter 113 Article 27 13
reasonably avoidable net drainage from each developed unit (that is, drainage which is not
equalized by counter-drainage), and will give to each producer the opportunity to use his just and
equitable share of the reservoir energy. (1945, c. 702, s. 12; 1973, c. 1262, s. 86; 1987, c. 827, s.
112; 2012-143, s. 2(d); 2014-4, s. 10.)
§ 113-393. Development of lands as drilling unit by agreement or order of Commission.
(a) Integration of Interests and Shares in Drilling Unit. – When two or more separately
owned tracts of land are embraced within an established drilling unit, the owners thereof may
agree validly to integrate their interests and to develop their lands as a drilling unit. Where,
however, such owners have not agreed to integrate their interests, the Commission shall, for the
prevention of waste or to avoid drilling of unnecessary wells, require such owners to do so and to
develop their lands as a drilling unit. All orders requiring such integration shall be made after
notice and hearing, and shall be upon terms and conditions that are just and reasonable, and will
afford to the owner of each tract the opportunity to recover or receive his just and equitable share
of the oil and gas in the pool without unnecessary expense, and will prevent or minimize
reasonably avoidable drainage from each developed unit which is not equalized by
counter-drainage. The portion of the production allocated to the owner of each tract included in a
drilling unit formed by an integration order shall, when produced, be considered as if it had been
produced from such tract by a well drilled thereon.
In the event such integration is required, and provided also that after due notice to all the
owners of tracts within such drilling unit of the creation of such drilling unit, and provided
further that the Commission has received no protest thereto, or request for hearing thereon,
whether or not 10 days have elapsed after notice has been given of the creation of the drilling
unit, the operator designated by the Commission to develop and operate the integrated unit shall
have the right to charge to each other interested owner the actual expenditures required for such
purpose not in excess of what are reasonable, including a reasonable charge for supervision, and
the operator shall have the right to receive the first production from the well drilled by him
thereon, which otherwise would be delivered or paid to the other parties jointly interested in the
drilling of the well, so that the amount due by each of them for his shares of the expense of
drilling, equipping, and operating the well may be paid to the operator of the well out of
production; with the value of the production calculated at the market price in the field at the time
such production is received by the operator or placed to his credit. After being reimbursed for the
actual expenditures for drilling and equipping and operating expenses incurred during the drilling
operations and until the operator is reimbursed, the operator shall thereafter pay to the owner of
each tract within the pool his ratable share of the production calculated at the market price in the
field at the time of such production less the reasonable expense of operating the well. In the
event of any dispute relative to such costs, the Commission shall determine the proper costs.
(b) When Each Owner May Drill. – Should the owners of separate tracts embraced within
a drilling unit fail to agree upon the integration of the tracts and the drilling of a well on the unit,
and should it be established that the Commission is without authority to require integration as
provided for in subsection (a) of this section, then, subject to all other applicable provisions of
this law, the owner of each tract embraced within the drilling unit may drill on his tract, but the
allowable production from each tract shall be such proportion of the allowable for the full
drilling unit as the area of such separately owned tract bears to the full drilling unit.
(c) Cooperative Development Not in Restraint of Trade. – Agreements made in the
interests of conservation of oil or gas, or both, or for the prevention of waste, between and
NC General Statutes - Chapter 113 Article 27 14
among owners or operators, or both, owning separate holdings in the same oil or gas pool, or in
any area that appears from geological or other data to be underlaid by a common accumulation of
oil or gas, or both, or between and among such owners or operators, or both, and royalty owners
therein, of a pool or area, or any part thereof, as a unit for establishing and carrying out a plan for
the cooperative development and operation thereof, when such agreements are approved by the
Commission, are hereby authorized and shall not be held or construed to violate any of the
statutes of this State relating to trusts, monopolies, or contracts and combinations in restraining
of trade.
(d) Variation from Vertical. – Whenever the Department fixes the location of any well or
wells on the surface, the point at which the maximum penetration of such wells into the
producing formation is reached shall not unreasonably vary from the vertical drawn from the
center of the hole at the surface, provided, that the Commission shall prescribe rules and the
Department shall prescribe orders governing the reasonableness of such variation. This
subsection shall not apply to wells drilled for the purpose of exploration or development of
natural gas through use of horizontal drilling in conjunction with hydraulic fracturing treatments.
(1945, c. 702, s. 13; 1973, c. 1262, s. 86; 1987, c. 827, s. 112; 2012-143, s. 3(a).)
§ 113-394. Limitations on production; allocating and prorating "allowables."
(a) The Commission may limit the total amount of oil, including condensate, which may
be produced in the State by fixing an amount which shall be designated "allowable" for the State.
The Commission may then allocate or distribute the "allowable" for the State among the pools on
a reasonable basis and in such manner as to avoid undue discrimination, and so that waste will be
prevented. In allocating the "allowable" for the State, and in fixing "allowables" for pools
producing oil or hydrocarbons forming condensate, or both oil and such hydrocarbons, the
Commission may take into account the producing conditions and other relevant facts with
respect to such pools, including the separate needs for oil, gas and condensate, and may
formulate rules setting forth standards or a program for the distribution of the "allowable" for the
State, and distribute the "allowable" for the State in accordance with such standards or program,
and where conditions in one pool or area are substantially similar to those in another pool or
area, then the same standards or programs shall be applied to such pools and areas so that as far
as practicable a uniform program will be followed; provided, however, the Commission shall
allow the production of a sufficient amount of natural gas from any pool to supply adequately the
reasonable market demand for such gas for light and fuel purposes if such production can be
obtained without waste, and the condensate "allowable" for such pool shall not be less than the
total amount of condensate produced or obtained in connection with the production of the gas
"allowable" for light and fuel purposes, and provided further that, if the amount allocated to pool
as its share of the "allowable" for the State is in excess of the amount which the pool should
produce to prevent waste, then the Commission shall fix the "allowable" for the pool so that
waste will be prevented.
In allocating "allowables" to pools, the Commission shall not be bound by nominations or
desires of purchasers to purchase oil from particular fields or areas, and the Commission shall
allocate the "allowable" for the State in such manner as will prevent undue discrimination against
any pool or area in favor of another or others which would result from selective buying or
nominating by purchasers of oil, as such term "selective buying or nominating" is understood in
the oil business.
(b) Repealed by Session Laws 2013-365, s. 4, effective July 29, 2013.
NC General Statutes - Chapter 113 Article 27 15
(c) Whenever the Commission limits the total amount of oil or gas which may be
produced in any pool in this State to an amount less than that which the pool could produce if no
restrictions were imposed (which limitation may be imposed either incidental to, or without, a
limitation of the total amount of oil or gas which may be produced in the State), the Commission
shall prorate or distribute the "allowable" production among the producers in the pool on a
reasonable basis, and so that each producer will have the opportunity to produce or receive his
just and equitable share, as such share is set forth in subsection G.S. 113-392(d), subject to the
reasonable necessities for the prevention of waste.
(d) Whenever the Commission limits the total amount of gas which may be produced
from a pool, the Commission shall then allocate or distribute the allowable production among the
developed areas in the pool on a reasonable basis, so that each producer will have the
opportunity to produce his just and equitable share, as such share is set forth in subsection G.S.
113-392(d), whether the restriction for the pool as a whole is accomplished by order or by the
automatic operation of the prohibitory provisions of this law. As far as applicable, the provisions
of subsection (a) of this section shall be followed in allocating any "allowable" of gas for the
State.
(e) After the effective date of any rule or order of the Commission fixing the "allowable"
production of oil or gas, or both, or condensate, no person shall produce from any well, lease, or
property more than the "allowable" production which is fixed, nor shall such amount be
produced in a different manner than that which may be authorized. (1945, c. 702, s. 14; 1973, c.
1262, s. 86; 1975, c. 19, ss. 37, 38; 1987, c. 827, s. 112; 2012-143, s. 2(e); 2013-365, s. 4.)
§ 113-395. Permits, fees, and notice required for oil and gas activities.
(a) Before any well, in search of oil or gas, shall be drilled, the person desiring to drill the
same shall submit an application for a permit to the Department upon such form as the
Department may prescribe and shall pay a fee of three thousand dollars ($3,000) for the first well
to be drilled on a pad and fifteen hundred dollars ($1,500) for each additional well to be drilled
on the same pad. The drilling of any well is prohibited unless the Department has issued a permit
for the activity.
(b) Any person desiring to use hydraulic fracturing treatments in conjunction with oil and
gas operations or activities shall submit an application for a permit to the Department upon such
form as the Department may prescribe. The use of hydraulic fracturing treatments is prohibited
unless the Department has issued a permit for the activity.
(c) Each abandoned well and each dry hole shall be plugged promptly in the manner and
within the time required by rules prescribed by the Commission, and the owner of such well shall
give notice, upon such form as the Commission may prescribe, of the abandonment of each dry
hole and of the owner's intention to abandon, and shall pay a fee of four hundred fifty dollars
($450.00). No well shall be abandoned until such notice has been given and such fee has been
paid. (1945, c. 702, s. 15; 1973, c. 1262, s. 86; 1987, c. 827, s. 113; 2011-276, s. 2; 2012-143, s.
3(c); 2014-4, s. 11.)
§ 113-395.1. Miscellaneous permit requirements.
The Department shall require that all natural gas compressor stations associated with an oil
and gas drilling operation be located inside a baffled building. (2014-4, s. 15(a).)
§ 113-395.2. Subsurface injection of waste prohibited.
NC General Statutes - Chapter 113 Article 27 16
(a) Disposal of wastes produced in connection with oil and gas exploration, development,
and production, and use of horizontal drilling and hydraulic fracturing treatments for that
purpose by injection to subsurface or groundwaters of the State by means of wells is prohibited
in accordance with G.S. 143-214.2.
(b) Notwithstanding G.S. 143-214.2, a violation of subsection (a) of this section shall
constitute a Class 1 misdemeanor. (2014-4, s. 15(a).)
§ 113-395.3. Environmental compliance review requirements for applicants and permit
holders.
(a) For purposes of this section, "applicant" means an applicant for a permit and a permit
holder and includes the owner or operator of the facility, and if the owner or operator is a
business entity, applicant also includes (i) the parent, subsidiary, or other affiliate of the
applicant; (ii) a partner, officer, director, member, or manager of the business entity, parent,
subsidiary, or other affiliate of the applicant; and (iii) any person with a direct or indirect interest
in the applicant, other than a minority shareholder of a publicly traded corporation who has no
involvement in management or control of the corporation or any of its parents, subsidiaries, or
affiliates.
(b) The Department shall conduct an environmental compliance review of each applicant
for a new permit under this Article. The environmental compliance review shall evaluate the
environmental compliance history of the applicant for a period of five years prior to the date of
the application and may cover a longer period at the discretion of the Department. The
environmental compliance review of an applicant may include consideration of the
environmental compliance history of the parents, subsidiaries, or other affiliates of an applicant
or parent that is a business entity, including any business entity or joint venturer with a direct or
indirect interest in the applicant, and other facilities owned or operated by any of them. The
Department shall determine the scope of the review of the environmental compliance history of
the applicant, parents, subsidiaries, or other affiliates of the applicant or parent, including any
business entity or joint venturer with a direct or indirect interest in the applicant, and of other
facilities owned or operated by any of them. An applicant for a permit shall provide
environmental compliance history information for each facility, business entity, joint venture, or
other undertaking in which any of the persons listed in this subsection is or has been an owner,
operator, officer, director, manager, member, or partner, or in which any of the persons listed in
this subsection has had a direct or indirect interest as requested by the Department.
(c) The Department shall determine the extent to which the applicant, or a parent,
subsidiary, or other affiliate of the applicant or parent, or a joint venturer with a direct or indirect
interest in the applicant, has substantially complied with the requirements applicable to any
activity in which any of these entities previously engaged and has substantially complied with
federal, North Carolina, and other states' laws, regulations, and rules for the protection of the
environment. The Department may deny an application for a permit if the applicant has a history
of significant or repeated violations of statutes, rules, orders, or permit terms or conditions for
the protection of the environment or for the conservation of natural resources as evidenced by
civil penalty assessments, administrative or judicial compliance orders, or criminal penalties.
(d) A permit holder shall notify the Department of any significant change in its
environmental compliance history or any significant change in the (i) identity of any person or
structure of the business entity that holds the permit for the facility; (ii) identity of any person or
structure of the business entity that owns or operates the facility; or (iii) assets of the permit
NC General Statutes - Chapter 113 Article 27 17
holder, owner, or operator of the facility. The permit holder shall notify the Department within
30 days of a significant change. A change shall be considered significant if it would result in a
change in the identity of the permit holder, owner, or operator for purposes of environmental
compliance review. Based on its review of the changes, the Department may modify or revoke a
permit, or require issuance of a new permit. (2014-4, s. 15(a).)
§ 113-395.4. Seismic or geophysical data collection.
(a) Notwithstanding any other provision of law, no liability for trespass shall arise from
activities conducted for the purpose of seismic or geophysical data collection. Provided,
however, (i) persons conducting seismic and geophysical data collection may only conduct such
activity by undershooting from an off-site location and without physical entry to private land,
unless the landowner's consent for such activity is obtained in writing and (ii) persons
conducting seismic or geophysical data collection shall be civilly liable for any physical or
property damage determined to be a direct result of their seismic or geophysical data collection
activities, whether or not the seismic or geophysical data collection was conducted by
undershooting the land at an off-site location or by physical entry to land as permitted by the
landowner.
(b) Conduct of seismic or geophysical data collection activities through physical entry to
land without a landowner's written consent shall constitute a Class 1 misdemeanor. (2014-4, s.
15(a).)
§ 113-396. Wells to be kept under control.
In order to protect further the natural gas fields and oil fields in this State, it is hereby
declared to be unlawful for any person to permit negligently any gas or oil well to go wild or to
get out of control. The owner of any such well shall, after 24 hours' written notice by the
Department given to him or to the person in possession of such well, make reasonable effort to
control such well.
In the event of the failure of the owner of such well within 24 hours after service of the
notice above provided for, to control the same, if such can be done within the period, or to begin
in good faith upon service of such notice, operations to control such well, or upon failure to
prosecute diligently such operations, then the Department shall have the right to take charge of
the work of controlling such well, and it shall have the right to proceed, through its own agents
or by contract with a responsible contractor, to control the well or otherwise to prevent the
escape or loss of gas or oil from such well all at the reasonable expense of the owner of the well.
In order to secure to the Department the payment of the reasonable cost and expense of
controlling or plugging such well, the Department shall retain the possession of the same and
shall be entitled to receive and retain the rents, revenues and income therefrom until the costs
and expenses incurred by the Department shall be repaid. When all such costs and expenses have
been repaid, the Department shall restore possession of such well to the owner; provided, that in
the event the income received by the Department shall not be sufficient to reimburse the
Department as provided for in this section, the Department shall have a lien or privilege upon all
of the property of the owner of such well, except such as is exempt by law, and the Department
shall proceed to enforce such lien or privilege by suit brought in any court of competent
jurisdiction, the same as any other civil action, and the judgment so obtained shall be executed in
the same manner now provided by law for execution of judgments. Any excess over the amount
NC General Statutes - Chapter 113 Article 27 18
due the Department which the property seized and sold may bring, after payment of court costs,
shall be paid over to the owner of such well. (1945, c. 702, s. 16; 1973, c. 1262, s. 86.)
§ 113-397. Hearing in emergency.
If an emergency situation, as defined by the Department, arises under this Article, the
Department may conduct a hearing to determine the appropriate course of action after giving any
notice it considers practicable. Chapter 150B of the General Statutes does not apply to a hearing
under this section. The rules of evidence apply in a hearing under this section. (1945, c. 702, s.
17; 1973, c. 1262, s. 86; 1987, c. 827, s. 114.)
§ 113-398. Procedure and powers in hearings by Department.
In the exercise and enforcement of its jurisdiction, the said Department is authorized to
summon witnesses, administer oaths, make ancillary orders and require the production of records
and books for the purpose of examination at any hearing or investigation conducted by it. In
connection with the exercise and enforcement of its jurisdiction, the Department shall also have
the right and authority to certify as for contempt, to the court of any county having jurisdiction,
violations by any person of any of the provisions of this Article or of the rules or orders of the
Department, and if it be found by said court that such person has knowingly and willfully
violated same, then such person shall be punished as for contempt in the same manner and to the
same extent and with like effect as if said contempt had been of an order, judgment or decree of
the court to which said certification is made. (1945, c. 702, s. 18; 1973, c. 1262, s. 86; 1987, c.
827, s. 115.)
§ 113-399. Suits by Department.
The Department may bring an action in any court of competent jurisdiction in the State to
enforce, by injunction or another remedy, an order issued or rule adopted by the Department
under this Article. The court may enter any judgment or order necessary to enforce an order
issued or rule adopted by the Department under this Article. (1945, c. 702, s. 19; 1973, c. 1262,
s. 86; 1987, c. 827, s. 116.)
§ 113-400. Assessing costs of hearings.
The said Department is hereby authorized and directed to tax and assess against the parties
involved in any hearing the costs incurred therein. (1945, c. 702, s. 20; 1973, c. 1262, s. 86.)
§ 113-401. Party to hearings; review.
The term "party" as used in this Article shall include any person, firm, corporation or
association. In proceedings for review of an order or decision of said Department, the
Department shall have all rights and privileges granted by this Article to any other party to such
proceedings. (1945, c. 702, s. 21; 1973, c. 1262, s. 86.)
§ 113-402. Administrative review.
A party who is dissatisfied with a decision or order of the Department under this Article may
obtain administrative review of the decision by filing a petition for a contested case hearing
under G.S. 150B-23 within 10 days after the decision or order is made. (1945, c. 702, s. 22;
1973, c. 1262, s. 86; 1987, c. 827, s. 117.)
NC General Statutes - Chapter 113 Article 27 19
§ 113-403. Judicial review.
Article 4 of Chapter 150B of the General Statutes governs judicial review of a decision or
order made under this Article. (1945, c. 702, s. 23; 1973, c. 1262, s. 86; 1987, c. 827, s. 118.)
§§ 113-404 through 113-405: Repealed by Session Laws 1987, c. 827, s. 119.
§ 113-406. Effect of pendency of judicial review; stay of proceedings.
The filing or pendency of the application for judicial review provided for in this Article shall
not in itself stay or suspend the operation of any order or decision of the Department, but, during
the pendency of such proceeding the court, in its discretion, may stay or suspend, in whole or in
part, the operation of the order or decision of the Department. No order so staying or suspending
an order or decision of the Department shall be made by any court of this State otherwise than on
five days' notice and, after a hearing, and if a stay or suspension is allowed the order granting the
same shall contain a specific finding, based upon evidence submitted to the court and identified
by reference thereto, that great or irreparable damage would otherwise result to the petitioner and
specifying the nature of the damage. (1945, c. 702, s. 26; 1973, c. 1262, s. 86; 1987, c. 827, s.
120.)
§ 113-407. Stay bond.
In case the order or decision of the Department is stayed or suspended, the order or judgment
of the court shall not become effective until a bond shall have been executed and filed with and
approved by the court, payable to the Department, sufficient in amount and security to secure the
prompt payment, by the party petitioning for the stay, of all damages caused by the delay in the
enforcement of the order or decision of the Department. (1945, c. 702, s. 27; 1973, c. 1262, s.
86.)
§ 113-408. Enjoining violation of laws and rules; service of process; application for drilling
well to include residence address of applicant.
Whenever it shall appear that any person is violating, or threatening to violate, any statute of
this State with respect to the conservation of oil or gas, or both, or any provision of this law, or
any rule or order made thereunder by any act done in the operation of any well producing oil or
gas, or by omitting any act required to be done thereunder, the Department, through the Attorney
General, may bring suit against such person in the superior court in the county in which the well
in question is located, to restrain such person or persons from continuing such violation or from
carrying out the threat of violation. In such suit the Department may obtain injunctions,
prohibitory and mandatory, including temporary restraining orders and temporary injunctions, as
the facts may warrant, including, when appropriate, an injunction restraining any person from
moving or disposing of illegal oil, illegal gas or illegal product, and any or all such commodities
may be ordered to be impounded or placed under the control of an agent appointed by the court
if, in the judgment of the court, such action is advisable.
If any such defendant cannot be personally served with summons in that county, personal
jurisdiction of that defendant in such suit may be obtained by service made on any employee or
agent of that defendant working on or about the oil or gas well involved in such suit, and by the
Department mailing a copy of the complaint in the action to the defendant at the address of the
defendant then recorded with the director of production and conservation.
NC General Statutes - Chapter 113 Article 27 20
Each application for the drilling of a well in search of oil or gas in this State shall include the
address of the residence of the applicant or each applicant, which address shall be the address of
each person involved in accordance with the records of the director of production and
conservation, until such address is changed on the records of the Department after written
request. (1945, c. 702, s. 28; 1973, c. 1262, s. 86; 1987, c. 827, s. 121.)
§ 113-409. Punishment for making false entries, etc.
Any person who, for the purpose of evading this law, or of evading any rule or order made
thereunder, shall intentionally make or cause to be made any false entry or statement of fact in
any report required to be made by this law or by any rule or order made hereunder; or who, for
such purpose, shall make or cause to be made any false entry in any account, record, or
memorandum kept by any person in connection with the provisions of this law or of any rule or
order made thereunder; or who, for such purpose, shall omit to make, or cause to be omitted, full,
true and correct entries in such accounts, records, or memoranda, of all facts and transactions
pertaining to the interest or activities in the petroleum industry of such person as may be required
by the Department under authority given in this law or by any rule or order made hereunder; or
who, for such purpose shall remove out of the jurisdiction of the State, or who shall mutilate,
alter, or by any other means falsify, any book, record, or other paper, pertaining to the
transactions regulated by this law, or by any rule or order made hereunder, shall be deemed
guilty of a Class 2 misdemeanor. (1945, c. 702, s. 29; 1973, c. 1262, s. 86; 1987, c. 827, s. 122;
1993, c. 539, s. 871; 1994, Ex. Sess., c. 24, s. 14(c).)
§ 113-410. Penalties for other violations.
(a) Any person who fails to secure a permit prior to drilling a well or using hydraulic
fracturing treatments, or who knowingly and willfully violates any provision of this Article, or
any rule or order of the Commission or the Department made hereunder, shall, in the event a
penalty for such violation is not otherwise provided for herein, be subject to a penalty of not to
exceed twenty-five thousand dollars ($25,000) a day for each and every day of such violation,
and for each and every act of violation, such penalty to be recovered in a suit in the superior
court of the county where the defendant resides, or in the county of the residence of any
defendant if there be more than one defendant, or in the superior court of the county where the
violation took place. The place of suit shall be selected by the Department, and such suit, by
direction of the Department, shall be instituted and conducted in the name of the Department by
the Attorney General. The payment of any penalty as provided for herein shall not have the
effect of changing illegal oil into legal oil, illegal gas into legal gas, or illegal product into legal
product, nor shall such payment have the effect of authorizing the sale or purchase or acquisition,
or the transportation, refining, processing, or handling in any other way, of such illegal oil,
illegal gas or illegal product, but, to the contrary, penalty shall be imposed for each prohibited
transaction relating to such illegal oil, illegal gas or illegal product.
(b) Any person knowingly and willfully aiding or abetting any other person in the
violation of any statute of this State relating to the conservation of oil or gas, or the violation of
any provisions of this law, or any rule or order made thereunder, shall be subject to the same
penalties as prescribed in subsection (a) of this section for the violation by such other person.
(c) In determining the amount of a penalty under this section, the Department shall
consider all of the following factors:
NC General Statutes - Chapter 113 Article 27 21
(1) The degree and extent of harm to the natural resources of the State, to the
public health, or to private property resulting from the violation.
(2) The duration and gravity of the violation.
(3) The effect on ground or surface water quantity or quality or on air quality.
(4) The cost of rectifying the damage.
(5) The amount of money the violator saved by noncompliance.
(6) Whether the violation was committed willfully or intentionally.
(7) The prior record of the violator in complying or failing to comply with this
Article or a rule adopted pursuant to this Article.
(8) The cost to the State of the enforcement procedures.
(d) If any civil penalty has not been paid within 60 days after notice of assessment has
been served on the violator or within 30 days after service of the final decision by the
administrative law judge in accordance with G.S. 150B-34, a final decision by the Committee on
Civil Penalty Remissions established under G.S. 143B-293.6, or a court order, whichever is later,
the Secretary or the Secretary's designee shall request the Attorney General to institute a civil
action in the superior court of any county in which the violator resides or has his or its principal
place of business to recover the amount of the civil penalty.
(e) The clear proceeds of penalties provided for in this section shall be remitted to the
Civil Penalty and Forfeiture Fund in accordance with G.S. 115C-457.2. (1945, c. 702, s. 30;
1973, c. 1262, s. 86; 1987, c. 827, s. 122; 1998-215, s. 50; 2012-143, s. 2(f).)
§ 113-411. Dealing in or handling of illegal oil, gas or product prohibited.
(a) The sale, purchase or acquisition, or the transportation, refining, processing or
handling in any other way of illegal oil, illegal gas or illegal product is hereby prohibited. All
persons purchasing any petroleum product must first be licensed to do so by the Department.
(b) Unless and until the Department provides for certificates of clearance or tenders, or
some other method, so that any person may have an opportunity to determine whether any
contemplated transaction of sale, purchase or acquisition, or transportation, refining, processing
or handling in any other way, involves illegal oil, illegal gas or illegal product, no penalty shall
be imposed for the sale, purchase or acquisition, or the transportation, refining, processing or
handling in any other way of illegal oil, illegal gas or illegal product, except under circumstances
hereinafter stated. Penalties shall be imposed for the commission of each transaction prohibited
in this section when the person committing the same knows that illegal oil, illegal gas or illegal
product is involved in such transaction, or when such person could have known or determined
such fact by the exercise of reasonable diligence or from facts within his knowledge. However,
regardless of lack of actual notice or knowledge, penalties as provided in this law shall apply to
any sale, purchase or acquisition, and to the transportation, refining, processing or handling in
any other way, of illegal oil, illegal gas or illegal product, where administrative provision is
made for identifying the character of the commodity as to its legality. It shall likewise be a
violation for which penalties shall be imposed for any person to sell, purchase or acquire, or to
transport, refine, process or handle in any other way any oil, gas or any product without
complying with any rule or order of the Department relating thereto. (1945, c. 702, s. 31; 1973, c.
1262, s. 86; 1987, c. 827, s. 122.)
§ 113-412. Seizure and sale of contraband oil, gas and product.
NC General Statutes - Chapter 113 Article 27 22
Apart from, and in addition to, any other remedy or procedure which may be available to the
Department, or any penalty which may be sought against or imposed upon any person with
respect to violations relating to illegal oil, illegal gas, or illegal product, all illegal oil, illegal gas
and illegal product shall, except under such circumstances as are stated herein, be contraband and
shall be seized and sold. Such sale shall not take place unless the court shall find, in the
proceeding provided for in this paragraph, that the commodity involved is contraband. Whenever
the Department believes that illegal oil, illegal gas or illegal product is subject to seizure and
sale, as provided herein, it shall, through the Attorney General, have issued a warrant of
attachment and bring a civil action in rem for that purpose in the superior court of the county
where the commodity is found, or the action may be maintained in connection with any suit or
cross bill for injunction or for penalty relating to any prohibited transaction involving such illegal
oil, illegal gas or illegal product. Any interested person who may show himself to be adversely
affected by any such seizure and sale shall have the right to intervene in such suit to protect his
rights.
The action referred to above shall be strictly in rem and shall proceed in the name of the State
as plaintiff against the illegal oil, illegal gas or illegal product mentioned in the complaint, as
defendant, and no bond or bonds shall be required of the plaintiff in connection therewith. Upon
the filing of the complaint, the clerk of the court shall issue a summons directed to the sheriff of
the county, or to such other officer or person as the court may authorize to serve process,
requiring him to summon any and all persons (without undertaking to name them) who may be
interested in the illegal oil, illegal gas, or illegal product mentioned in the complaint to appear
and answer within 30 days after the issuance and service of such summons. The summons shall
contain the style and number of the suit and a very brief statement of the nature of the cause of
action. It shall be served by posting one copy thereof at the courthouse door of the county where
the commodity involved in the suit is alleged to be located and by posting another copy thereof
near the place where the commodity is alleged to be located. Copy of such summons shall be
posted at least five days before the return day stated therein, and the posting of such copy shall
constitute constructive possession of such commodity by the State. A copy of the summons shall
also be published once each week for four weeks in some newspaper published in the county
where the suit is pending and having a bona fide circulation therein. No judgment shall be
pronounced by any court condemning such commodity as contraband until after the lapse of five
days from the last publication of said summons. Proof of service of said summons, and the
manner thereof, shall be as provided by general law.
Where it appears by a verified pleading on the part of the plaintiff, or by affidavit, or
affidavits, or by oral testimony, that grounds for the seizure and sale exist, the clerk, in addition
to the summons or warning order, shall issue a warrant of attachment, which shall be signed by
the clerk and bear the seal of the court. Such warrant of attachment shall specifically describe the
illegal oil, illegal gas or illegal product, so that the same may be identified with reasonable
certainty. It shall direct the sheriff to whom it is addressed to take into his custody, actual or
constructive, the illegal oil, illegal gas or illegal product, described therein, and to hold the same
subject to the orders of the court. Said warrant of attachment shall be executed as a writ of
attachment is executed. No bond shall be required before the issuance of such warrant of
attachment, and the sheriff shall be responsible upon his official bond for the proper execution
thereof.
In a proper case, the court may direct the sheriff to deliver the custody of any illegal oil,
illegal gas or illegal product seized by him under a warrant of attachment, to a commissioner to
NC General Statutes - Chapter 113 Article 27 23
be appointed by the court, which commissioner shall act as the agent of the court and shall give
bond with such approved surety as the court may direct, conditioned that he will faithfully
conserve such illegal oil, illegal gas or illegal product, as may come into his custody and
possession in accordance with the orders of the court; provided, that the court may in its
discretion appoint any member of the Department or any agent of the Department as such
commissioner of the court.
Sales of illegal oil, illegal gas or illegal product seized under the authority of this law, and
notices of such sales, shall be in accordance with the laws of this State relating to the sale and
disposition of attached property; provided, however, that where the property is in custody of a
commissioner of the court, the sale shall be held by said commissioner and not by the sheriff. For
his services hereunder, such commissioner shall receive a reasonable fee to be paid out of the
proceeds of the sale or sales to be fixed by the court ordering such sale.
The court may order that the commodity be sold in specified lots or portions, and at specified
intervals, instead of being sold at one time. Title to the amount sold shall pass as of the date of
the law which is found by the court to make the commodity contraband. The judgment shall
provide for the clear proceeds of the sales to be remitted to the Civil Penalty and Forfeiture Fund
in accordance with G.S. 115C-457.2. The amount sold shall be treated as legal oil, legal gas or
legal product, as the case may be, in the hands of the purchaser, but the purchaser and the
commodity shall be subject to all applicable laws, rules, and orders with respect to further sale or
purchase or acquisition, and with respect to the transportation, refining, processing, or handling
in any other way, of the commodity purchased.
Nothing in this section shall deny or abridge any cause of action a royalty owner, or a
lienholder, or any other claimant, may have, because of the forfeiture of the illegal oil, illegal
gas, or illegal product, against the person whose act resulted in such forfeiture. No illegal oil,
illegal gas or illegal product shall be sold for less than the average market value at the time of
sale of similar products of like grade and character. (1945, c. 702, s. 32; 1973, c. 1262, s. 86;
1987, c. 827, s. 123; 1998-215, s. 51.)
§ 113-413: Repealed by Session Laws 1987, c. 827, s. 124.
§ 113-414. Filing list of renewed leases in office of register of deeds.
On December 31 of each year, or within 10 days thereafter, every person, firm or corporation
holding petroleum leases shall file in the office of the register of deeds of the county within
which the land covered by such leases is located, a list showing the leases which have been
renewed for the ensuing year. (1945, c. 702, s. 34.)
§ 113-415. Conflicting laws.
No provision of this Article shall be construed to repeal, amend, abridge or otherwise affect
the authority and responsibility (i) vested in the Environmental Management Commission by
Article 7 of Chapter 87 of the General Statutes, pertaining to the location, construction, repair,
operation and abandonment of wells; (ii) vested in the Environmental Management Commission
related to the control of water and air pollution as provided in Articles 21 and 21A of Chapter
143 of the General Statutes; (iii) vested in the Department and the Commission for Public Health
by Article 10 of Chapter 130A of the General Statutes pertaining to public water-supply
requirements; or (iv) vested in the Environmental Management Commission related to the
management of solid and hazardous waste as provided in Article 9 of Chapter 130A of the
NC General Statutes - Chapter 113 Article 27 24
General Statutes. (1971, c. 813, s. 7; 1973, c. 476, s. 128; c. 1262, s. 23; 1989, c. 727, s. 121;
2007-182, s. 2; 2012-143, s. 2(g); 2014-122, s. 11(k); 2015-1, s. 3.7.)
§ 113-415.1. Local ordinances regulating oil and gas exploration, development, and
production activities invalid; petition to preempt local ordinance.
(a) It is the intent of the General Assembly to maintain a uniform system for the
management of oil and gas exploration, development, and production activities, and the use of
horizontal drilling and hydraulic fracturing for that purpose, and to place limitations upon the
exercise by all units of local government in North Carolina of the power to regulate the
management of oil and gas exploration, development, and production activities by means of
ordinances, property restrictions, zoning regulations, or otherwise. Notwithstanding any
authority granted to counties, municipalities, or other local authorities to adopt local ordinances,
including, but not limited to, those imposing taxes, fees, or charges or regulating health,
environment, or land use, all provisions of local ordinances, including those regulating land use,
adopted by counties, municipalities, or other local authorities that regulate or have the effect of
regulating oil and gas exploration, development, and production activities within the jurisdiction
of a local government are invalidated and unenforceable, to the extent necessary to effectuate the
purposes of this Part, that do the following:
(1) Place any restriction or condition not placed by this Article upon oil and gas
exploration, development, and production activities and use of horizontal
drilling or hydraulic fracturing for that purpose within any county, city, or
other political subdivision.
(2), (3) Repealed by Session Laws 2015-264, s. 56.2(a), effective retroactively to
June 4, 2014.
(4) In any manner are in conflict or inconsistent with the provisions of this
Article.
(b), (c) Repealed by Session Laws 2015-264, s. 56.2(a), effective retroactively to June 4,
2014.
(c1) If a local zoning or land-use ordinance imposes requirements, restrictions, or
conditions that are generally applicable to development, including, but not limited to, setback,
buffer, and stormwater requirements, and oil and gas exploration, development, and production
activities would be regulated under the ordinance of general applicability, the operator of the
proposed activities may petition the Oil and Gas Commission to review the matter. After receipt
of a petition, the Commission shall hold a hearing in accordance with the procedures in
subsection (d) of this section and shall determine whether or to what extent to preempt the local
ordinance to allow for the regulation of oil and gas exploration, development, and production
activities.
(d) When a petition described in subsection (c1) of this section has been filed with the
Oil and Gas Commission, the Commission shall hold a public hearing to consider the petition.
The public hearing shall be held in the affected locality within 60 days after receipt of the
petition by the Commission. The Commission shall give notice of the public hearing by both of
the following means:
(1) Publication in a newspaper or newspapers having general circulation in the
county or counties where the activities are to be conducted, once a week for
three consecutive weeks, the first notice appearing at least 30 days prior to the
scheduled date of the hearing.
NC General Statutes - Chapter 113 Article 27 25
(2) First-class mail to persons who have requested notice. The Commission shall
maintain a mailing list of persons who request notice in advance of the
hearing pursuant to this section. Notice by mail shall be complete upon
deposit of a copy of the notice in a postage-paid wrapper addressed to the
person to be notified at the address that appears on the mailing list maintained
by the Commission, in a post office or official depository under the exclusive
care and custody of the United States Postal Service.
(e) Any interested person may appear before the Oil and Gas Commission at the hearing
to offer testimony. In addition to testimony before the Commission, any interested person may
submit written evidence to the Commission for the Commission's consideration. At least 20 days
shall be allowed for receipt of written comment following the hearing.
(f) A local zoning or land-use ordinance is presumed to be valid and enforceable to the
extent the zoning or land-use ordinance imposes requirements, restrictions, or conditions that are
generally applicable to development, including, but not limited to, setback, buffer, and
stormwater requirements, unless the Oil and Gas Commission makes a finding of fact to the
contrary. The Commission shall determine whether or to what extent to preempt local ordinances
so as to allow for the establishment and operation of the facility no later than 60 days after
conclusion of the hearing. The Commission shall preempt a local ordinance only if the
Commission makes all of the following findings:
(1) That there is a local ordinance that would regulate oil and gas exploration,
development, and production activities, or use of horizontal drilling or
hydraulic fracturing for that purpose.
(2) That all legally required State and federal permits or approvals have been
issued by the appropriate State and federal agencies or that all State and
federal permit requirements have been satisfied and that the permits or
approvals have been denied or withheld only because of the local ordinance.
(3) That local citizens and elected officials have had adequate opportunity to
participate in the permitting process.
(4) That the oil and gas exploration, development, and production activities, and
use of horizontal drilling or hydraulic fracturing for that purpose, will not pose
an unreasonable health or environmental risk to the surrounding locality and
that the operator has taken or consented to take reasonable measures to avoid
or manage foreseeable risks and to comply to the maximum feasible extent
with applicable local ordinances.
(g) If the Oil and Gas Commission does not make all of the findings under subsection (f)
of this section, the Commission shall not preempt the challenged local ordinance. The
Commission's decision shall be in writing and shall identify the evidence submitted to the
Commission plus any additional evidence used in arriving at the decision.
(h) The decision of the Oil and Gas Commission shall be final unless a party to the action
files a written appeal under Article 4 of Chapter 150B of the General Statutes, as modified by
this section, within 30 days of the date of the decision. The record on appeal shall consist of all
materials and information submitted to or considered by the Commission, the Commission's
written decision, a complete transcript of the hearing, all written material presented to the
Commission regarding the location of the oil and gas exploration, development, and production
activities, the specific findings required by subsection (f) of this section, and any minority
positions on the specific findings required by subsection (f) of this section. The scope of judicial
NC General Statutes - Chapter 113 Article 27 26
review shall be as set forth in G.S. 150B-51, except as this subsection provides regarding the
record on appeal.
(i) If the court reverses or modifies the decision of the Oil and Gas Commission, the
judge shall set out in writing, which writing shall become part of the record, the reasons for the
reversal or modification.
(j) In computing any period of time prescribed or allowed by this procedure, the
provisions of Rule 6(a) of the Rules of Civil Procedure, G.S. 1A-1, shall apply. (2014-4, s. 14;
2015-264, s. 56.2(a).)
§§ 113-416 through 113-419. Repealed by Session Laws 1959, c. 779, s. 3.
Part 3. Landowner Protection.
§ 113-420. Notice and entry to property.
(a) Notice Required for Activities That Do Not Disturb Surface of Property to Surface
Owner. – If an oil or gas developer or operator is not the surface owner of the property on which
oil and gas operations are to occur, before entering the property for oil or gas operations that do
not disturb the surface, including inspections, staking, surveys, measurements, and general
evaluation of proposed routes and sites for oil or gas drilling operations, the developer or
operator shall give written notice to the surface owner at least 14 days before the desired date of
entry to the property. Notice shall be given by certified mail, return receipt requested. The
requirements of this subsection may not be waived by agreement of the parties. The notice, at a
minimum, shall include all of the following:
(1) The identity of person(s) requesting entry upon the property.
(2) The purpose for entry on the property.
(3) The dates, times, and location on which entry to the property will occur,
including the estimated number of entries.
(b) Notice Required for Land-Disturbing Activities to Surface Owner. – If an oil or gas
developer or operator is not the surface owner of the property on which oil or gas operations are
to occur, before entering the property for oil or gas operations that disturb the surface, the
developer or operator shall give written notice to the surface owner at least 30 days before the
desired date of entry to the property. Notice shall be given by certified mail, return receipt
requested. The notice, at a minimum, shall include all of the following:
(1) A description of the exploration or development plan, including, but not
limited to (i) the proposed locations of any roads, drill pads, pipeline routes,
and other alterations to the surface estate and (ii) the proposed date on or after
which the proposed alterations will begin.
(2) An offer of the oil and gas developer or operator to consult with the surface
owner to review and discuss the location of the proposed alterations.
(3) The name, address, telephone number, and title of a contact person employed
by or representing the oil or gas developer or operator who the surface owner
may contact following the receipt of notice concerning the location of the
proposed alterations.
(b1) Persons Entering Land; Identification Required; Presumption of Proper Protection
While on Surface Owners' Property. – Persons who enter land on behalf of an oil or gas
developer or operator for oil and gas operations shall carry on their person identification
sufficient to identify themselves and their employer or principal and shall present the
NC General Statutes - Chapter 113 Article 27 27
identification to the surface owner upon request. Entry upon land by such a person creates a
rebuttable presumption that the surface owner properly protected the person against personal
injury or property damage while the person was on the land.
(b2) Notice of Initiation of Exploration, Development, and Production Activities to Owner
of Subsurface Oil or Gas Resources. – If an oil or gas developer or operator is the lessee of
subsurface oil or gas resources, before initiating oil or gas exploration or development operations
with respect to those resources, the developer or operator shall give written notice to the lessor of
those resources at least 30 days before the oil and gas operations are to be initiated. The notice, at
a minimum, shall include all of the following:
(1) A description of the exploration or development plan, including, the proposed
date on which the exploration or development will begin.
(2) The name, address, telephone number, and title of a contact person employed
by or representing the oil or gas developer or operator who the lessor may
contact following the receipt of notice.
(c) Venue. – If the oil or gas developer or operator fails to give notice or otherwise
comply with the provisions of this section, the surface owner may seek appropriate relief in the
superior court for the county in which the oil or gas well is located and may receive actual
damages. (2011-276, s. 3(b); 2012-143, s. 4(a); 2014-4, s. 12.)
§ 113-421. Presumptive liability for water contamination; compensation for other
damages; responsibility for reclamation.
(a) Presumptive Liability for Water Contamination. – It shall be presumed that an oil or
gas developer or operator is responsible for contamination of all water supplies that are within a
one-half mile radius of a wellhead that is part of the oil or gas developer's or operator's activities
unless the presumption is rebutted by a defense established as set forth in subsection (a1) of this
subsection. If a contaminated water supply is located within a one-half mile radius of a wellhead,
in addition to any other remedy available at law or in equity, including payment of compensation
for damage to a water supply, the developer or operator shall provide a replacement water supply
to the surface owner and other persons using the water supply at the time the oil or gas
developer's activities were commenced on the property, which water supply shall be adequate in
quality and quantity for those persons' use.
(a1) [Rebuttal of Presumption.] In order to rebut a presumption arising pursuant to
subsection (a) of this section, an oil or gas developer or operator shall have the burden of proving
by a preponderance of the evidence any of the following:
(1) The contamination existed prior to the commencement of the drilling activities
of the oil or gas developer or operator, as evidenced by a pre-drilling test of
the water supply in question conducted in conformance with G.S. 113-423(f).
(2) The surface owner or owner of the water supply in question refused the oil or
gas developer or operator access to conduct a pre-drilling test of the water
supply conducted in conformance with G.S. 113-423(f).
(3) The water supply in question is not within a one-half mile radius of a wellhead
that is part of the oil or gas developer's or operator's activities.
(4) The contamination occurred as the result of a cause other than activities of the
developer or operator.
(a2) Compensation for Other Damages Required. – The oil or gas developer or operator
shall be obligated to pay the surface owner compensation for all of the following:
NC General Statutes - Chapter 113 Article 27 28
(1) Any damage to a water supply in use prior to the commencement of the
activities of the developer or operator which is due to those activities.
(2) The cost of repair of personal property of the surface owner, which personal
property is damaged due to activities of the developer or operator, up to the
value of replacement by personal property of like age, wear, and quality.
(3) Damage to any livestock, crops, or timber determined according to the market
value of the resources destroyed, damaged, or prevented from reaching market
due to the oil or gas developer's or operator's activities.
(a3) Reclamation of Surface Property Required. – An oil or gas developer or operator
shall:
(1) Reclaim all surface areas affected by its operations no later than two years
following completion of the operations. If the developer or operator is not the
surface owner of the property, prior to commencement of activities on the
property, the oil or gas developer or operator shall provide a bond running to
the surface owner sufficient to cover reclamation of the surface owner's
property. Upon registration with the Department pursuant to G.S. 113-378, a
developer shall request that the Oil and Gas Commission set the amount of the
bond required by this subsection. As part of its request, the developer shall
provide supporting documentation, including information about the proposed
oil and gas activities to be conducted, the site on which they are to occur, and
any additional information required by the Commission. The Commission
shall set the amount of the bond in accordance with the criteria adopted by the
Commission pursuant to G.S. 113-391(a)(13a) and notify the developer and
surface owner of the amount within 30 days of setting the amount of a bond.
A surface owner or developer may appeal the amount of a bond set pursuant
to this subsection to the Commission within 60 days after receipt of notice
from the Commission of the amount required. After evaluation of the appeal
and issuance of written findings, the Commission may order that the amount
of the bond be modified. Parties aggrieved by a decision of the Commission
pursuant to this subsection may appeal the decision as provided under Article
4 of Chapter 150B of the General Statutes within 30 days of the date of the
decision.
(2) Provide a bond running to the State sufficient to cover any potential
environmental damage caused by the drilling process in an amount no less
than one million dollars ($1,000,000). The Commission may increase the
amount of the bond required by this subdivision if the Commission determines
that the drilling operation would be sited in an environmentally sensitive area.
(a4) Remediation Required. – Nothing in this Article shall be construed to obviate or
affect the obligation of a developer or operator to comply with any other requirement under law
to remediate contamination caused by its activities.
(a5) Replacement Water Supply Required. – If a water supply belonging to the surface
owner or third parties is contaminated due to the activities of the developer or operator, in
addition to any other remedy available at law or in equity, the developer or operator shall provide
a replacement water supply to persons using the water supply at the time the oil or gas
developer's activities were commenced on the property, which water supply shall be adequate in
quality and quantity for those persons' use.
NC General Statutes - Chapter 113 Article 27 29
(b) Time Frame for Compensation. – When compensation is required, the surface owner
shall have the option of accepting a one-time payment or annual payments for a period of time
not less than 10 years.
(c) Venue. – The surface owner has the right to seek damages pursuant to this section in
the superior court for the county in which the oil or gas well is located. The superior court for the
county in which the oil or gas well is located has jurisdiction over all proceedings brought
pursuant to this section. If the surface owner or the surface owner's assignee is the prevailing
party in an action to recover unpaid royalties or other damages owed due to activities of the
developer or operator, the court shall award any court costs and reasonable attorneys' fees to the
surface owner or the surface owner's assignee.
(d) [Certain Limits Void. –] Conditions precedent, notice provisions, or arbitration
clauses included in lease documents that have the effect of limiting access to the superior court in
the county in which the oil or gas well is located are void and unenforceable.
(e) Joint and Several Liability. – In order to provide maximum protection for the public
interest, any actions brought for recovery of cleanup costs, damages, or for civil penalties
brought pursuant to this section or any other section of this Article or rules adopted thereunder
may be brought against any one or more of the persons having control over the activities that
contributed to the contamination, damage to property, or other violations. All such persons shall
be jointly and severally liable, but ultimate liability as between the parties may be determined by
common-law principles. (2011-276, s. 3(b); 2012-143, s. 4(b); 2013-365, s. 5(c); 2014-4, ss. 4(c),
13(a).)
§ 113-422. Indemnification.
An oil or gas developer or operator shall indemnify and hold harmless a surface owner
against any claims related to the developer's or operator's activities on the surface owner's
property, including, but not limited to, (i) claims of injury or death to any person; (ii) damage to
impacted infrastructure or water supplies; (iii) damage to a third party's real or personal property;
and (iv) violations of any federal, State, or local law, rule, regulation, or ordinance, including
those for protection of the environment. (2011-276, s. 3(b); 2012-143, s. 4(c).)
§ 113-423. Required lease terms.
(a) Required Information to be Provided to Potential Lessors and Surface Owners. –
Prior to executing a lease for oil and gas rights or any other conveyance of any kind separating
rights to oil or gas from the freehold estate of surface property, an oil or gas developer or
operator, or any agent thereof, shall provide the lessor with a copy of this Part and a publication
produced by the Consumer Protection Division of the North Carolina Department of Justice
entitled "Oil & Gas Leases: Landowners' Rights." If the lessor is not the surface owner of the
property, the oil or gas developer or operator shall also provide the surface owner with a copy of
this Part and the publication prior to execution of a lease for oil and gas rights.
(b) Maximum Duration. – Any lease of oil or gas rights or any other conveyance of any
kind separating rights to oil or gas from the freehold estate of surface property shall expire at the
end of 10 years from the date the lease is executed, unless, at the end of the 10-year period, oil or
gas is being produced for commercial purposes from the land to which the lease applies. If, at
any time after the 10-year period, commercial production of oil or gas is terminated for a period
of six months or more, all rights to the oil or gas shall revert to the surface owner of the property
to which the lease pertains. No assignment or agreement to waive the provisions of this
NC General Statutes - Chapter 113 Article 27 30
subsection shall be valid or enforceable. As used in this subsection, the term "production"
includes the actual production of oil or gas by a lessee, or when activities are being conducted by
the lessee for injection, withdrawal, storage, or disposal of water, gas, or other fluids, or when
rentals or royalties are being paid by the lessee. No force majeure clause shall operate to extend a
lease beyond the time frames set forth in this subsection.
(c) Minimum Royalty Payments. – Any lease of oil or gas rights or any other conveyance
of any kind separating rights to oil or gas from the freehold estate of surface property shall
provide that the lessor shall receive a royalty payment of not less than twelve and one-half
percent (12.5%) of the proceeds of sale of all oil or gas produced from the lessor's just and
equitable share of the oil and gas in the pool, which sum shall not be diminished by
pre-production or post-production costs, fees, or other charges assessed by the oil or gas
developer or operator against the property owner. Royalty payments shall commence no later
than six months after the date of first sale of product from the drilling operations subject to the
lease and thereafter no later than 60 days after the end of the calendar quarter within which
subsequent production is sold. At the time each royalty payment is made, the oil or gas developer
or operator shall provide documentation to the lessor on the time period for which the royalty
payment is made, the quantity of product sold within that period, and the price received, at a
minimum. If royalty payments have not been made within the required time frames, the lessor
shall be entitled to interest on the unpaid royalties commencing on the payment due date at the
rate of twelve and one-half percent (12.5%) per annum on the unpaid amounts. Upon written
request, the lessor shall be entitled to inspect and copy records of the oil or gas developer or
operator related to production and royalty payments associated with the lease.
(d) Bonus Payments. – Any bonus payments, or other initial payments, due under a lease
of oil or gas rights or any other conveyance of any kind separating rights to oil or gas from the
freehold estate of surface property shall be paid by the lessee to the lessor within 60 days of
execution of a lease. If a bonus payment or other initial payment has not been made within the
required time frame, the lessor shall be entitled to interest on the unpaid amount commencing on
the payment due date at the rate of ten percent (10%) per annum on the unpaid amount.
(e) Agreements for Use of Other Resources; Associated Payments. – Any lease of oil or
gas rights or any other conveyance of any kind separating rights to oil or gas from the freehold
estate of surface property shall clearly state whether the oil or gas developer or operator shall use
groundwater or surface water supplies located on the property and, if so, shall clearly state the
estimated amount of water to be withdrawn from the supplies on the property, and shall require
permission of the surface owner therefore. At a minimum, water used by the developer or
operator shall not restrict the supply of water for domestic uses by the surface owner. The lease
shall provide for full compensation to the surface owner for water used from the property by the
developer or operator in an amount not less than the fair market value of the water consumed
based on water sales in the area at the time of use.
(f) Pre-Drilling Testing of Water Supplies. – Any lease of oil or gas rights or any other
conveyance of any kind separating rights to oil or gas from the freehold estate of surface
property shall include a clause that requires the oil or gas developer or operator to pay for the
reasonable costs involved in testing all water supplies within a one-half mile radius from a
proposed wellhead that is part of the oil or gas developer's or operator's activities at least 30 days
prior to initial drilling activities and at least five follow-up tests at six months, 12 months, 18
months, and 24 months after production has commenced and a test within 30 days after
completion of production activities at the site. The Department shall identify the location of all
NC General Statutes - Chapter 113 Article 27 31
water supplies, including wells, on a property on which drilling operations are proposed to occur.
A surface owner shall use an independent third party selected from a laboratory certified by the
Department's Wastewater/Groundwater Laboratory Certification program to sample wells
located on their property, and the developer or operator shall pay for the reasonable costs
involved in testing of the wells in question. Developers and operators may share analytical
results obtained with other developers and operators as necessary or advisable. All analytical
results from testing conducted pursuant to this section (i) shall be provided to the Department
within 30 days of testing and (ii) shall constitute a public record under Chapter 132 of the
General Statutes, and the Department shall post any results to the Department's Web site within
30 days of receipt of the results. Nothing in this subsection shall be construed to preclude or
impair the right of any surface owner to refuse pre-drilling testing of wells located on their
property.
(g) Recordation of Leases. – Any lease of oil or gas rights or any other conveyance of
any kind separating rights to oil or gas from the freehold estate of surface property, including
assignments of such leases, shall be recorded within 30 days of execution in the register of deeds
office in the county that the land that is subject to the lease is located.
(h) Notice of Assignment Required. – Written notice of assignment of any lease of oil or
gas rights or any other conveyance of any kind separating rights to oil or gas from the freehold
estate of surface property shall be provided to the lessor within 30 days of such assignment. If
the surface owner of the property is not the lessor, written notice of assignment of any lease of
oil or gas rights shall also be given to the surface owner of the property to which the lease
pertains within 30 days of such assignment.
(i) Lender Approval of Lease. – Any lease for oil or gas rights or any other conveyance
of any kind separating rights to oil or gas from the freehold estate of surface property with a
surface owner shall include a conspicuous boldface disclosure concerning notification to lenders,
which shall be initialed by the surface owner, and state the following:
NOTICE TO LENDER(S) PRIOR TO EXECUTION OF LEASE:
Surface owners are advised to secure written approval from any lender who
holds a mortgage or deed of trust on any portion of the surface property
involved in the lease prior to execution of the lease and obtain written
confirmation that execution of the lease will not violate any provision
associated with any applicable mortgage or deed of trust, which could
potentially result in foreclosure.
I have read and understood the __________________
terms of this provision. Surface Owner's Initials
(j) Seven-Day Right of Rescission. – Any lease of oil or gas rights or any other
conveyance of any kind separating rights to oil or gas from the freehold estate of surface
property shall be subject to a seven-day right of rescission in which the lessor or lessee may
cancel the lease. A bold and conspicuous notice of this right of rescission shall be included in all
such leases. In order to cancel the lease, the lessor or lessee shall notify the other party in writing
within seven business days of execution of the lease, and the lessor shall return any sums paid by
the lessee to the lessor under the terms of the lease. (2011-276, s. 3(b); 2012-143, s. 4(d);
2012-201, s. 12(d); 2014-4, s. 13(b).)
§ 113-423.1. Surface activities.
NC General Statutes - Chapter 113 Article 27 32
(a) Agreements on Rights and Obligations of Parties. – The developer or operator and the
surface owner may enter into a mutually acceptable agreement that sets forth the rights and
obligations of the parties with respect to the surface activities conducted by the developer or
operator.
(b) Minimization of Intrusion Required. – An oil or gas developer or operator shall
conduct oil and gas operations in a manner that accommodates the surface owner by minimizing
intrusion upon and damage to the surface of the land. As used in this subsection, "minimizing
intrusion upon and damage to the surface" means selecting alternative locations for wells, roads,
pipelines, or production facilities, or employing alternative means of operation that prevent,
reduce, or mitigate the impacts of the oil and gas operations on the surface, where such
alternatives are technologically sound, economically practicable, and reasonably available to the
operator. The standard of conduct set forth in this subsection shall not be construed to (i) prevent
an operator from entering upon and using that amount of the surface as is reasonable and
necessary to explore for, develop, and produce oil and gas and (ii) abrogate or impair a
contractual provision binding on the parties that expressly provides for the use of the surface for
the conduct of oil and gas operations or that releases the operator from liability for the use of the
surface. Failure of an oil or gas developer or operator to comply with the requirements of this
subsection shall give rise to a cause of action by the surface owner. Upon a determination by the
trier of fact that such failure has occurred, a surface owner may seek compensatory damages and
equitable relief. In any litigation or arbitration based upon this subsection, the surface owner
shall present evidence that the developer's or operator's use of the surface materially interfered
with the surface owner's use of the surface of the land. After such showing, the developer or
operator shall bear the burden of proof of showing that it minimized intrusion upon and damage
to the surface of the land in accordance with the provisions of this subsection. If a developer or
operator makes that showing, the surface owner may present rebuttal evidence. A developer or
operator may assert, as an affirmative defense, that it has conducted oil or gas operations in
accordance with a regulatory requirement, contractual obligation, or land-use plan provision that
is specifically applicable to the alleged intrusion or damage. Nothing in this subsection shall do
any of the following:
(1) Preclude or impair any person from obtaining any and all other remedies
allowed by law.
(2) Prevent a developer or operator and a surface owner from addressing the use
of the surface for oil and gas operations in a lease, surface use agreement, or
other written contract.
(3) Establish, alter, impair, or negate the authority of local governments to
regulate land use related to oil and gas operations. (2012-143, s. 4(e).)
§ 113-424: Repealed by Session Laws 2012-143, s. 4(f), effective July 2, 2012.
§ 113-425. Registry of landmen required.
(a) Establishment of Registry. – The Department of Environmental Quality, in
consultation with the Consumer Protection Division of the North Carolina Department of Justice,
shall establish and maintain a registry of landmen operating in this State. As used in this section,
"landman" means a person that, in the course and scope of the person's business, does any of the
following:
(1) Acquires or manages oil or gas interests.
NC General Statutes - Chapter 113 Article 27 33
(2) Performs title or contract functions related to the exploration, exploitation, or
disposition of oil or gas interests.
(3) Negotiates for the acquisition or divestiture of oil or gas rights, including the
acquisition or divestiture of land or oil or gas rights for a pipeline.
(4) Negotiates business agreements that provide for the exploration for or
development of oil or gas.
(b) Registration Required. – A person may not act, offer to act, or hold oneself out as a
landman in this State unless the person is registered with the Department in accordance with this
section. To apply for registration as a landman, a person shall submit an application to the
Department on a form to be provided by the Department, which shall include, at a minimum, all
of the following information:
(1) The name of the applicant or, if the applicant is not an individual, the names
and addresses of all principals of the applicant.
(2) The business address, telephone number, and electronic mail address of the
applicant.
(3) The social security number of the applicant or, if the applicant is not an
individual, the federal employer identification number of the applicant.
(4) A list of all states and other jurisdictions in which the applicant holds or has
held a similar registration or license.
(5) A list of all states and other jurisdictions in which the applicant has had a
similar registration or license suspended or revoked.
(6) A statement whether any pending judgments or tax liens exist against the
applicant.
(c) The Department may deny registration to an applicant, reprimand a registrant,
suspend or revoke a registration, or impose a civil penalty on a registrant if the Department
determines that the applicant or registrant does any of the following:
(1) Fraudulently or deceptively obtains, or attempts to obtain, a registration.
(2) Uses or attempts to use an expired, suspended, or revoked registration.
(3) Falsely represents oneself as a registered landman.
(4) Engages in any other fraud, deception, misrepresentation, or knowing
omission of material facts related to oil or gas interests.
(5) Had a similar registration or license denied, suspended, or revoked in another
state or jurisdiction.
(6) Otherwise violates this section.
(d) An applicant may challenge a denial, suspension, or revocation of a registration or a
reprimand issued pursuant to subsection (c) of this section, as provided in Chapter 150B of the
General Statutes.
(e) The Department shall adopt rules as necessary to implement the provisions of this
section. (2012-143, s. 4(g); 2015-241, s. 14.30(u).)
§ 113-426. Publication of information for landowners.
In order to effect the pre-lease publication distribution requirement as set forth in G.S.
113-423(a), and to otherwise inform the public, the Consumer Protection Division of the North
Carolina Department of Justice, in consultation with the North Carolina Real Estate Commission,
shall develop and make available a publication entitled "Oil & Gas Leases: Landowners' Rights"
to provide general information on consumer protection issues and landowner rights, including
NC General Statutes - Chapter 113 Article 27 34
information on leases of oil or gas rights, applicable to exploration and extraction of gas or oil.
The Division and the Commission shall update the publication as necessary. (2012-143, s. 4(h).)
§ 113-427. Additional remedies.
The remedies provided by this Part are not exclusive and do not preclude any other remedies
that may be allowed by law. (2012-143, s. 4(i).)